Non-security, non-collateral loans for MSMEs up to INR 200 lakh

Background: Though MSMEs are the bank bone of the Indian economy, they often struggle to raise funds and even stay afloat. Anil Ganga sheds light on non-security, non-collateral loans for micro and small enterprises up to INR 200 lakh.

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) was launched by the Government of India (GoI) to make available collateral-free credit to the Micro and Small enterprise sector. The Ministry of Micro, Small and Medium Enterprises, GoI and Small Industries Development Bank of India (SIDBI), registered / established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises. The scheme was formally launched on August 30, 2000. The corpus of CGTMSE is being contributed by the GoI and SIDBI in the ratio of 4:1 respectively.

A composite all-in Annual Guarantee Fee of 1.0 % p.a. of the credit facility sanctioned (0.75% for credit facility up to INR 5 lakh and 0.85% for above INR 5 lakh and up to INR 100 lakh for women, micro enterprises and units in north east region including Sikkim) is now being charged.